Pulling back from the brink

By Michael Stanley

“This is just a show they put on for themselves. Don’t worry,” is what a friend of mine who works for the National Football League (NFL) told me about the stall in talks between players, unions and owners that resulted in the lockout during July of 2011. Concurrently, Congress was in the midst of an ugly debate regarding the debt ceiling and I drew parallels between the two in an editorial published on August 4, 2011 entitled: On the brink.

In the editorial, I examined the effectiveness of the negotiating tactic of brinkmanship, concluding that the established and popular strategy defined as pushing things to the verge of disaster in order to achieve the most advantageous outcome for oneself was just a carnival of posturing that eventually led to an accord. I contended that everyone knew that this was just a show politicians put on for themselves and people shouldn’t worry.

The day after On the brink was published, the final agreement to raise the debt ceiling was passed by Congress and Standard and Poor’s (S&P), citing the troublesome process of reaching debt ceiling consensus, downgraded the country’s sovereign credit rating for the first time.

S&P then went one step further and downgraded the credit rating of certain mutual insurers, including major players like New York Life and Northwestern Mutual because they were heavily invested in U.S. Treasuries and their businesses were, for the most part, concentrated in the U.S.

It appeared I was partly wrong. Although I am still convinced that brinkmanship is a circus that involves pandering for the purpose of political preservation, the extraction of innocuous prizes and a Broadway caliber of political theatre -- all taking place while both parties are cognizant of where they are willing to compromise -- institutions, people and countries still worry.

As I write this editorial, 26 months after the first, the country once again finds itself in the throes of yet another debt ceiling debate; this time, during a partial government shutdown. Both thoroughly sum up the political paralysis gripping the country, the divergence of pragmatism towards extreme partisanship within both major political parties and the effusive inefficiency oozing out of our capital city.

And again, as I write this I am sure that there will be some type of last-minute, stop-gap deal where both parties return to their respective bases of zealotry with finely tuned talking points of how they had to give up less than the other in order for an agreement to be reached. What I am not sure of anymore is that brinkmanship is a necessary, albeit sloppy, tactic that should always be employed in order to squeeze concessions which, in the vast scheme of things, are totally trivial.

Brinkmanship may simply not be worth the damage that is causes. There are some, either through their fanaticism or their naiveté, who believe that the partial government shutdown is not disruptive enough to get them to compromise. There are others with their arm chair hypothetical economics who contend that failure to raise the debt ceiling would not be devastating.

They ignorantly and mistakenly contend that failure to raise the debt ceiling would not result in the U.S. not being able to pay its bills even as the Treasury and respected economists have stated that the amount of cash that comes into the Treasury on a daily basis is uneven with the amount of cash that goes out.

Optimistic markets, which over the last two weeks have ticked in tandem with every hope and disappointment that a deal is going to be reached have displayed confidence that one eventually will be. As have I.

The question that remains, however, is whether rankling markets, worrying our creditors and breeding skepticism about the trustworthiness of the U.S. government is as important as, say, repealing or not repealing for that matter, the medical device tax included in the Patient Protection and Affordable Care Act.

The ridiculousness of it all is apparent to anyone who does not hold allegiance to any party or set of ideals over the good of the country. Unfortunately, few in Washington these days do.

Retirees who depend on Social Security payments are having trouble sleeping at night because the Secretary of the Treasury has stated that those payments might be put on the chopping block if a deal is not reached to raise the debt ceiling, Fitch Ratings has publicly stated that they would consider lowering the top credit rating of the U.S. if a deal is not made and Chinese leaders have called on world leaders to “deAmericanize.”

It appears to me that we all know this is a show they are putting on for themselves. Yet still, we continue to worry.